The Future of Work 2018 Whitaker Lecture, Central Bank of Ireland - - PowerPoint PPT Presentation

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The Future of Work 2018 Whitaker Lecture, Central Bank of Ireland - - PowerPoint PPT Presentation

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The Future of Work 2018 Whitaker Lecture, Central Bank of Ireland Mark Carney Governor 14 September 2018 Little evidence of technological unemployment over long term Unemployment rate Employment population ratio (per cent) (per cent) 60

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The Future of Work

2018 Whitaker Lecture, Central Bank of Ireland Mark Carney Governor

14 September 2018

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Unemployment rate (per cent) 4 8 12 16 20 24 10 20 30 40 50 60 1760 1780 1800 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 1st IR 2nd IR 3rd IR

Little evidence of technological unemployment over long term

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Employment population ratio Unemployment rate Employment population ratio (per cent)

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30 40 50 60 70 10 20 30 40 50 60 70 1770 1780 1790 1800 1810 1820 1830 1840 1850 1860 1870 Real wage (Index: 1900 = 100) Output per worker (Index: 1900 = 100)

Pickup in real wages lagged productivity during the 1st IR

Engels' Pause - Growth in output per worker exceeds real wage growth Output per worker Real wage

Source: A Millennium of Data, Bank of England. Note: series are ten year moving averages 3

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Technology impacts labour market through…

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Technology impacts labour market through destruction…

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Technology impacts labour market through productivity…

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Technology impacts labour market through creation…

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Could this time be different?

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4th Industrial Revolution replacing heads not hands?

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Jobs with tasks at risk of automation: huge range of estimates

Jobs with tasks at risk by 2030

50% 30% 9%

PwC (2016) Arntz et al. (2016)

10 20 30 40

Slovak Republic Spain Poland Germany Austria France Ireland Czech Republic Italy Japan All countries in sample Belgium Canada Singapore Estonia United Kingdom Netherlands Denmark Korea United States New Zealand Sweden Finland Norway

Percentage of jobs at high risk of automation United Kingdom Ireland All countries in sample

Source: Nedelkoska, L and Quintini, G (2018), “Automation, skills use and training”, OECD Social, Employment and Migration Working Paper. 9

Frey & Osborne (2017) McKinsey (2016)

Source: Nedelkoska, L and Quintini, G (2018), ‘Automation, skills use and training’, OECD Social, Employment and Migration Working Papers No. 202.

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Technology adoption lags decreasing over time

Notes: Technology adoption lag is a mean estimated lag in cross-country technology diffusion. Source: Comin, D and Hobijn, B (2010), ‘An exploration of technology diffusion’, American Economic Review, Vol. 100, No. 5, pp2031-59. 10

20 40 60 80 100 120 140 1750 1800 1850 1900 1950 2000 Technology adoption lag (years)

Invention year of technology

Steam and motorships Railways - passengers Railways - freight MRI units Blast oxygen Aviation - passengers Telephones Electricity Aviation - freight Cars Trucks Telegrams PCs Internet users Cellphones

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  • 2.0
  • 1.5
  • 1.0
  • 0.5

0.0 0.5 1.0 1.5 2.0 1817-1871 1871-1937 1973-2007 2018-2030 (12 years) (66 years) (34 years) (54 years)

Annual change in sectoral employment shares (pp)

1st IR 2nd IR 3rd IR 4th IR?

Agriculture & Mining Manufacturing Services Expanding Shrinking

This time it’s faster?

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  • 25
  • 20
  • 15
  • 10
  • 5

5 10 15 20 25 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 40 42 44 46 48 50 52 54 56 58 60 Percentage change relative to 1990 Per cent

Technology driving labour share down globally

Relative price

  • f investment

Labour share

Source: IMF April 2017 WEO. Notes: the chart shows the labour share and relative price of investment across advanced economies.

UK inequality high but stable

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0.20 0.25 0.30 0.35 0.40 0.45 0.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 1960 1970 1980 1990 2000 2010

90/10 ratio Gini coefficient

1990

90/10 ratio Gini coefficient

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Technology polarising labour market

Source: Autor, D (2015) ‘Why Are There Still So Many Jobs? The History and Future of Workplace Automation’, Journal of Economic Perspectives, Vol. 29, No. 3, pp.3-30. 13

  • 0.10
  • 0.05

0.00 0.05 0.10 0.15 0.20 20 40 60 80 100 1979-1989 1989-1999 1999-2007 2007-2012 100 x Change in Employment Share Skill percentile (ranked by occupation’s 1979 mean log wage) Growth of low-skilled jobs Growth of high-skilled jobs Expanding Shrinking

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Technology polarising labour market

Source: Autor (2014) ‘Education, and the Rise of Earnings Inequality Among the "Other 99 Percent“, Science, 23 May 2014, pp 843–851. 14

0.8 1.0 1.2 1.4 1.6 1.8 2.0 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008

Real wage level of full time U.S. male workers relative to 1963

Greater than Bachelor’s Degree High School Dropout

Bachelor’s Degree Some College High School Graduate

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What has been done

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Institution Effect Examples Enabling institutions Transformed the skill base of workers Spread of primary, secondary, tertiary and technical education New insurance institutions Supported those displaced Unemployment insurance, universal healthcare, state pensions, child benefit Labour market institutions Influenced provisions and shared the surplus Friendly Societies, Trade Unions, Co-

  • peratives, minimum wages

Employers Created environments to help employees thrive “Model Villages” (providing housing, schooling and recreation), higher pay (Ford’s $5 initiative), occupational pensions

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  • Identify skills mismatches and adopt anticipatory talent

management strategies

  • More effective workforce training, as skill set of existing

employees is rate limiting factor of technology adoption

  • Corporate re-training programmes for workers to be

retained by company and returned to workforce

  • Providers of general purpose technologies explore
  • pportunities to maximise job-creating, augmented

intelligence Business

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  • Balance labour mobility with appropriate protection of

workers in new, non-standard jobs

  • Taylor Review of modern working practices suggests people

working for platform-based companies be classed as dependent contractors

  • Embrace technology-enabled solutions to improve matching

and bridge skills gaps

  • Enhance benefits and data portability (including reputational

histories of dependent contractors)

  • Incentives for human capital and physical investment

Labour market institutions

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  • Successive IRs developed primary, secondary and tertiary

education

  • Could 4IR lead to quaternary education?
  • Institutionalise re-training in mid-career
  • Integrated with social welfare system
  • Universal support schemes for retraining
  • The UK’s Flexible Learning Fund and New Enterprise

Allowance

  • Singapore’s SkillsFuture programme

Enabling institutions

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  • New payment solutions for distributed commerce and real-

time P2P transactions

  • More effective, platform-based finance for SMEs
  • Data-based financing for intangibles
  • More efficient cross border transactions and trade finance

through better payments plumbing and robust digital IDs

  • Expand impact investing to build social capital consistent

with new labour market Financial system

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Monetary policy

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Lower labour demand relative to supply Increase in structural unemployment from skills mismatches and other frictions Changing worker bargaining power due to increased automation

Inflation Supply-demand Excess supply Excess demand

Potential inflationary consequences

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The Future of Work

2018 Whitaker Lecture, Central Bank of Ireland Mark Carney Governor

14 September 2018